Golfers Say Trump Reneged on Deal

When last we left Donald J. Trump, at least here on the sports page, we were recalling the time he owned the New Jersey Generals in the short-lived United States Football League. Trump bought the Generals in 1983, after their first season, and immediately began pushing the league to move its season from the spring to the fall and take on the mighty N.F.L. His campaign generated a tremendous amount of publicity for Trump, but produced nothing but misery for the other owners. After a Trump-orchestrated antitrust suit against the N.F.L. backfired spectacularly, the once-promising U.S.F.L. went kaput.

Trump was in his late 30s when he owned the Generals, so perhaps any mistakes in judgment were the product of a certain youthful impetuousness. He wasn’t the seasoned businessman — or television personality, or self-proclaimed billionaire — he would become.

But I was recently alerted to a dispute at a Trump-owned golf resort in Jupiter, Fla., which suggests that his football follies weren’t a one-off. In this dispute, members say Trump, who in 2012 bought what is now called Trump National Jupiter from Marriott Vacations Worldwide, basically stiffed them out of their refundable deposits, many of which were in the range of $200,000. Some of the members had to swallow the loss (in return for some paltry benefits) because they had bought time shares or homes that were part of the resort development. Others negotiated settlements. Still others sued. One suit has gained class-action status, and if a federal judge doesn’t dismiss the case between now and June (unlikely), it will go to trial.

But let’s start at the beginning, shall we?

Refundable deposits on membership were once quite common in the golf resort business. (They fell out of favor after the 2008 financial crisis.) In the Jupiter case, the Ritz-Carlton Hotel Company, which is owned by Marriott Vacations Worldwide, built a Jack Nicklaus-designed golf course, a resort and more than 100 homes, about half of which were time shares. When the development was announced in 2002, The Palm Beach Post reported that the asking price for a house went as high as $2 million, while the time shares started at $220,000.

The refundable deposits from members provided some of the working capital for Ritz-Carlton. Which meant, of course, that the money wasn’t just sitting in a bank somewhere. If too many people asked for refunds at the same time, it would be a disaster. So strings were attached. Members could get their deposits back after 30 years. But if they wanted to resign before then, they had to get on a resignation list and wait until new members joined and anted up new deposits. (I’m told that the Ritz usually required two new members for someone on the resignation list to get his or her money back.)

Although the home sales and time shares made money for Ritz-Carlton, the resort did not. According to a former member named Bernie Carballo, who’s in the golf course business himself and who saw the resort’s books, by 2011 the resort was generating some $13 million in revenue, and had an annual loss of around $1.2 million. It also had a huge liability: nearly $30 million in those refundable deposits. So in 2012, Marriott Vacations Worldwide decided to sell.

The buyer was Trump Golf. The company is probably the largest piece of the Trump portfolio — though with Trump, one never really knows about such things — with 17 golf resorts, including the National Doral in Miami and Turnberry in Scotland.

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A golfer in 2006 at what is now the Trump National Jupiter golf resort, which Donald Trump bought in 2012 for $5 million along with $30 million in debt.CreditAlex Quesada for The New York Times

Trump Golf confines itself to resorts and golf courses, and eschews time shares. So his business model has no use for refundable deposits. On the contrary, a Trump Golf member usually pays a nonrefundable deposit — one considerably less than $200,000 — plus annual dues.

The sale to Trump was completed on Dec. 4, 2012. Trump Golf paid $5 million — and agreed, as part of the sale, to assume the $30 million in debt resulting from the members’ refundable deposits. (Marriott Vacations Worldwide held on to the time shares.) In fact, he had no intention of honoring that agreement.

Three days after the sale was completed, Trump held a meeting at his new resort. He told the assembled members that he was eager to make Trump National Jupiter “one of the finest clubs anywhere in the world!” as he put it in a Dec. 17 letter that reiterated what he had said in the meeting. But its membership rules were “antiquated,” preventing the resort from becoming “ultra-luxurious” and “ultra-prestigious.”

He told the members that if they wanted to remain in the resort, they would have to give up their refundable deposit; in return, he would freeze their dues for three years (saving them, at most, $20,000), and give them the right to play at other Trump golf courses (for a fee, of course). Members who stayed but didn’t accept that deal would be denied those benefits and see an immediate dues increase of $4,000. Stuck with the homes and time shares they had bought, many of the home-owning members accepted the deal.

But there was also one other category of members: those on the resignation list. By the time Trump took over the Jupiter resort, the resignation list had grown to an astonishing 150 members. That was more than half the club.

During the time the Ritz ran the resort, people who put themselves on the resignation list still had access to the resort and the golf course, and they still paid dues. And why wouldn’t they? Until new members joined, allowing them to recoup their deposit, they were still members of the resort. They hadn’t resigned, but simply announced their desire to resign.

Trump, however, wanted nothing to do with them. He immediately barred them from the club, and said he would no longer accept their dues. (According to a brief filed by the plaintiffs in the class-action suit, Trump later complained that the people on the resignation list were in arrears on their dues.) As he bluntly put it in his Dec. 17 letter, “If you choose to remain on the resignation list — you’re out.”

According to one attendee, the members listened in stunned silence.

(Nearly everyone who spoke to me for this column requested anonymity. Some did so because they had nondisclosure agreements with the Trump organization, while others said they were fearful of Trump’s reaction if they criticized him publicly.)

What was taking place in Jupiter was an essential part of Trump’s modus operandi. In every deal, he has to win and you have to lose. He is notorious for refusing to pay full price to contractors and vendors after they’ve completed work for him. And he basically dares the people he has stiffed to sue him, knowing that his deep pockets and bevy of lawyers give him a big advantage over those who feel wronged by him.

Just as with the Generals, where he bought into a spring football league despite wanting to play in the fall, he bought into a resort that was built around refundable deposits despite having a nonrefundable business model. If he had done nothing, it would have been decades before he would have had to pay out most of the deposits because the number of members on the resignation list far exceeded the number of new members joining the club.

Many members reacted by suing Trump Golf. Given that the cost of a full-blown lawsuit was obviously going be higher than a $200,000 deposit, many of those on the resignation list sought to settle. The typical settlement was for 50 cents on the dollar, meaning that Trump was pocketing $100,000 of their deposit. Carballo says that the last time he checked, the debt had dropped below $18 million.

As for the class-action suit, the core issue is whether Trump had the right to change the agreement the members signed with Ritz-Carlton — and whether he terminated certain membership categories, which gave the members the right to demand an immediate refund.

“When Trump said to people you are either in or out, and if you stay on the resignation list, I don’t want your money and you are out, he terminated the members’ category,” said Seth Lehrman, the lawyer who is bringing the class-action suit. “Our claim is that when Trump made that announcement, and confirmed it in writing, he triggered an obligation to pay within 30 days.”

Needless to say, Trump disagrees. “We made changes in the rules, which we have the authority to do, but we did not eliminate any membership categories,” Alan Garten, the Trump organization’s chief lawyer, said.

He says that Trump National Jupiter has been offering refunds, in an orderly manner, as members get to the top of the resignation list. When members want to get off the resignation list sooner, they negotiate a settlement. Simple as that. Garten flatly denied that the changes Trump made to the rules deprived any of the members the right to their refundable deposit. For what is basically a contract dispute, the trial in June ought to be a doozy.

There is one other thing about Trump National Jupiter that is worth pointing out. As I’ve noted, when the Ritz-Carlton ran the resort, it lost $1.2 million on $13 million in revenue. Last year, under Trump’s management, revenue dropped to $12.4 million, according to the financial disclosure forms he submitted last year as part of his presidential candidacy. It also has fewer members thanks to his counterproductive decision to bar all the people on the resignation list.

Which leads to a pretty obvious question: How much is Trump National Jupiter losing today?

Email: nocera@nytimes.com
Twitter: @noceraNYT

Doris Burke contributed reporting.

A version of this article appears in print on , on Page D1 of the New York edition with the headline: Golfers Say Trump Reneged on Deal . Order Reprints | Today’s Paper | Subscribe